Vacancy rates in large U.S. shopping malls are rising, prompting some analysts to speculate that a shift in shopping mall space usage is coming. As an increasing number of “anchor stores,” such as J.C. Penney and Sears, close their doors across the country, large malls are finding new uses for the empty space. “We see all of these [changes] as an opportunity to have a more positive impact on the shopping center,” observed one Valdosta, Georgia, retail space director optimistically in the wake of an announcement that Maurice’s, Hallmark, Jessie July, and Sears would all vacate her development. She added that the closures will result in conversions to “fresh new retail” for the property.

While this take is certainly a sunny one, national trends seem to indicate mall owners and managers will have to do something serious in order to continue to generate profits as an increasing number of retail shoppers look elsewhere for their buying needs. Vacancy rates rose to 8.4 percent in Q1 2018, which is the highest rate since 2012. Rising vacancies during first quarter is normal, but these rates are troublingly high, said real estate data firm Reis Inc.

“The first quarter tends to see the lowest activity,” Reis analysts observed. “However, this was an unusually slow quarter for retail leasing and construction.”

The rising popularity of mixed-use developments is one manifestation of the shift in consumer preferences. According to one Forbes analyst, “shopping alone or shopping primarily cannot be the reason why people come to the mall anymore.” Mixed-use developments combining living and work venues with walking trails, retail, and entertainment venues to attract foot traffic and physical visits from potential consumers. While many investors find walkability of the locale to still be a secondary attraction for buyers and renters, access to mixed-use communities is a rising, primary attraction for new and younger households.

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  • Carole VanSickle Ellis

    Carole VanSickle Ellis serves as the news editor and COO of Self-Directed Investor (SDI) Society, a membership organization dedicated to the needs of self-directed investors interested in alternative investment vehicles, including real estate. Learn more at SelfDirected.org or reach Carole directly by emailing Carole@selfdirected.org.

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